Some gamblers are buying losing lottery tickets on eBay as a way offset taxes on their gambling wins | Fortune

Why would anyone drop more than five Benjamins for $90,000 worth of losing lottery tickets? Most of the listings you’ll see on eBay will be entitled along the lines of “collectibles” or for “arts and crafts” purposes. You’ll see the word “vintage” brandished about here and there, a “rare” or “no value” dropped in others. But search long enough and you’ll see the words “tax write offs” or “tax deduction” in the titles of listings that somehow made it past eBay’s filters.

“This is a way to offset your taxes—clearly tax fraud,” said Jeffrey Hoopes, a professor of accounting at the University of North Carolina’s Kenan-Flagler Business School and research director of the UNC Tax Center. “There’s lots of ways to commit tax fraud. This is just an interesting one, and usually you don’t buy it on eBay, so it’s an interesting example.”

All earnings from lotteries, raffles, sports betting, horse races and casinos are fully taxable and must be reported on a return. Thanks to a narrow provision in the tax code, IRS Topic 419, people can offset the taxes from their gambling winnings.

But losses can only be deducted by filers who itemize and who kept a record of both winnings and losses, and the deduction is capped at whatever winnings were reported. To back up that deduction, the IRS requires an accurate diary of winnings and losses, plus receipts, tickets, statements or other records.

So in other words, those stacks of lottery tickets or scratch-offs on eBay may be benefitting a select group of people looking to bring their gambling wins home, tax free. Sometimes, however, Hoopes said people might actually just like to hold onto tickets.

“There are people who collect all sorts of random pieces of paper for whatever reason that don’t necessarily have to do with fraudulent tax documentation. So I do not doubt that even if you couldn’t deduct gambling losses for taxes, that somebody might be willing to buy these stacks.”

An eBay spokesperson confirmed as much in a statement to Fortune: “Expired lottery tickets with collectible value may be listed on eBay as long as the listing clearly states the item is expired and is permitted for sale under local law. Listings that promote potentially improper uses of these items are not allowed and will be removed.”

The company’s lottery ticket policy says as much as well. That leaves little room to read “TAX WRITE OFFS” as anything but the improper use eBay says it screens for.

While eBay removes any listings that go against its terms of service, but that doesn’t stop creative loopholes.

“EBay just facilitates transactions between two people. They never take hold of the inventory,” Hoopes said. “I don’t see eBay really ever being liable, but I’m not a lawyer.”

Gambling is growing in the U.S.

Last year, Americans wagered roughly $166 billion on sports alone, more than the country’s film, music, book and museum industries generated combined. That figure doesn’t include lottery play, casino gaming, or the tribal wagering that regulators can’t easily track.

This year has added an entirely new channel on top of that base: prediction markets. Combined monthly trading volume on Kalshi and Polymarket rose from less than $5 billion in September 2025 to about $24 billion in April 2026, according to a Pew Research Center analysis—a level that already tops the roughly $14 billion legal sportsbooks handled per month, on average, in 2025.

During the summer’s World Cup, prediction-market activity swelled to roughly 27% of all legal U.S. sports-betting volume, up from 9% at the start of the year, with Kalshi at one point seeing nearly 10 times its early-2026 pace. Every one of those contracts produces a winner and a loser, and every winner owes the IRS money on the same terms as someone cashing a winning lottery ticket.

The IRS’s own compliance record on gambling income suggests plenty of winners simply don’t report it in the first place, long before anyone gets to the question of fake tickets. A 2024 audit by the Treasury Inspector General for Tax Administration (TIGTA) found that nearly 149,000 people who won more than $15,000 gambling between 2018 and 2020 never filed a return reflecting it, accounting for $13.2 billion in unreported winnings. TIGTA estimated the IRS could collect roughly $1.4 billion more in taxes annually just by pursuing those cases.

Hoopes said he keeps a three-inch stack of losing tickets in the school’s tax museum, bought on eBay, for research. Using historical eBay listing data pulled from ListingsHistory.com, he tracked auctions tagged “losing lottery tickets” from 2014 to 2017 and charted them by month. Listings climb from 59 in January to a peak of 66 in March, and hold near that level through April, then fall by more than half by June, before bottoming out around 27 to 33 a month for the rest of the year aside from a smaller bump to 41 in September. The high months line up with the run-up to the April 15 filing deadline; the low months line up with everything after it.

The timing points to three different kinds of fraudsters, Hoopes said: someone stocking up in April while filing a return, someone buying in December while closing out the year’s paperwork, or someone buying only after getting audited—in which case purchases would spread evenly through the year rather than cluster.

Whatever the timing, Hoopes doesn’t hedge on what the purchase amounts to. He compared it to fabricating receipts for a small business: most people commit that kind of fraud simply by not reporting income, he said, but some are tempted to manufacture paper to back up invented expenses.

One thing has changed since Hoopes first wrote about this: the tax treatment of gambling losses itself. Under the the One Big Beautiful Bill Act Congress passed last year, gamblers can no longer fully offset their losses against their winnings.

Starting with the 2026 tax year, only 90% of gambling losses are deductible against winnings, down from 100% before. Someone who won $100,000 and lost $100,000 in the same year could once wipe out the tax bill entirely; now the same break-even year leaves $10,000 of taxable “phantom income.” That means even a perfectly documented, perfectly legitimate loss now shields less of a winner’s tax bill than it used to.

The revenue Congress expects to raise by tightening the loss-deduction rules is modest: the Joint Committee on Taxation projects the recently passed 90% cap will bring in only about $1.1 billion over 10 years.